Implied Volatility with C++ and Python Pt. 1

Let's take a well deserved break from thinking about data and get to some code.

Implied Volatility in Words

Volatility is a critical component to pricing options. Unfortunately it is a latent (or unobserved) quantity. Options traders therefore need a way to understand what the market says about volatility. Traders will look at the market price of an option and use a pricing model to figure out what volatility must be input into the model to match the price observed in the market. Whatever that volatility ends up being is called the implied volatility. In other words, the volatility implied by market prices.

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